Academic

Today the Treasury Department purchased $40 billion in senior preferred stock in AIG, and, courtesy of the Fed, now the vig is at LIBOR plus 3 instead of LIBOR plus 8.  When paired with the roughly $150 billion the Fed has put into the company, in three tranches, it makes the bailout of the formerly obscure insurer much more expensive than a bailout of Ford and GM, which aren't obscure.  How can this be?

• Perhaps this is known to all the Glom's readers, but I suspect AIG will tell you is that part of the problem is that its contracts keep obligating it to post more collateral, which it doesn't have ... but that it doesn't mean that the contract will not eventually be performed, and the collateral paid back.  It's the old "bailout as investment" line.
• The investment comes pursuant to EESA, and with it comes EESA's executive compensation rules; here is a novel one, though:  AIG must implement "a freeze on the size of the annual bonus pool for the top 70 company executives."
• Does EESA permit a stock purchase in an insurer?  Yes.
• Here is live coverage of AIG's conference call.  Here is the Fed.  Here is the Treasury announcement.